A “return of the state” in energy transitions? The making of a hydrogen economy in the European Union

1 Introduction

On June 29th, 2023, the last newsletter by Derek Brower for the widely read Energy Source of the Financial Times delivered a rattling message: “Capitalism won’t deliver the energy transition fast enough … and nor will Big Oil”. Contrary to popular belief, it contended that governments – not investment funds or oil majors – will have the upper hand in spearheading the radical overhaul of global energy systems. In recent years, initiatives like the Green New Deal, Build Back Better, and a plethora of net-zero-by-X pledges have contributed to a progressive departure from the triad of privatization, liberalization, and fiscal discipline distinctive of the Washington consensus. State capital is expanding, as evidenced by the proliferation of sovereign wealth funds (SWFs) from less than 50 at the turn of the century to almost 200 in 2023, managing over $11.5 trillion in assets. For comparison, BlackRock, the largest asset manager, totals less than $9.5 trillion. Similarly, state-owned enterprises (SOEs) and states’ participation as shareholders of publicly listed companies has tripled over the last two decades, now accounting for almost 11 % of global equity ($11.7 trillion) (OECD 2024).

These trends have sparked a renewed interest in industrial policy (Chang and Andreoni 2020; Rodrik 2014), critical state theory (Jessop 2016; Johnstone and Newell 2018), new forms of developmental state (Dafermos et al. 2021; Gabor and Sylla 2023), as well as state capitalism (Alami et al. 2022; Babić and Dixon 2022). Consequently, the growing prominence of the state in economic policy has resulted in an extensive but fragmented academic literature.

Scholarly discussions often hinge on functionalist characterizations, ideal state types and roles, or comparative historical case studies – whereas the notion of the state itself oddly fades into the background. These have fostered lively and pertinent (albeit necessarily partial) debates over successful or failing strategies, state retreat versus market expansion, Washing Consensus versus variants of post-Washington Consensus, and so forth. Alternatively, we argue that neither an ideal typology of state roles vis-á-vis market forces nor a structuralist reading of state capitalism (that is, subjecting the unfolding of history to the diktat of capital accumulation) adequately explains how and understand why the state institutional ensemble intervenes in the world market economy. As a case study, this article addresses the under-theorization of the state in energy transition research by investigating the processes and logics through which the European Union (EU) and its member states engage in the making of a hydrogen economy.

Similar questions have recently inspired a new wave of research in international political economy scholarship (Alami and Dixon 2023; Alami et al. 2022; Babić et al. 2020; Dafermos et al. 2021) and in economic geography calling for a “more robust theorizing of state roles in GVC/GPN literature”^[1] (De Marchi and Alford 2022, p. 89) (see also, Alford and Phillips 2018; Arnold and Hess 2017; Coe and Yeung 2019; Hess 2021; Horner 2017; Horner and Alford 2019; Mayer and Phillips 2017; Smith 2015; Werner 2021a). Moving beyond accounts that essentialize the state as an independent variable of political economic analysis (Jessop 2007, 2016]), this article builds on Horner’s (2017) typology of state roles (i.e., as a facilitator, regulator, buyer, and producer) in GVC/GPN to analyze the many hats that governments wear when partaking in the threading of industrial production processes, referred to in this Special Issue as the “State-GPN Nexus”. This contributes to the ongoing debate on the State-GPN Nexus by carving out a space for the analysis of multi-layered state strategies and the social relations underlying them. Therefore, how do states “do what they do”, and why?

Section 2 reviews the resurgence of state policy in political economy debates. It also assesses the main scholarly discussions on state roles in GPN research, with a focus on the energy sector. In light of this, Section 3 introduces Jessop’s strategic-relation approach (SRA) to the “actually existing” state. Turning then to hydrogen developments in the European Union (EU), Section 4 summarizes the methodology followed in building the case study, while Section 5 presents an analysis of the hydrogen Important Projects of Common European Interest (IPCEI), the European Hydrogen Bank, and the Hydrogen Valleys, which are then discussed in Section 6.

2 The state in global production networks of low-carbon energy

Recently, GPN/GVC scholarship has begun to address the role of the state in industry formation more explicitly, drawing both praise and criticism. This section offers, first, an overview of the current surge of interest around state capital and its relevance for the GPN approach. Second, it summarizes the main approaches to state policy and shortcomings found in the GPN literature, with a particular focus on state roles in low-carbon energy transitions.

3 Analyzing the “actually existing” state: The strategic-relational approach

Taking the regulatory essence of the state as the pre-analytical condition for understanding its participation in global production networks, state institutions can wear the facilitator, producer, buyer, and other hats at different times and geographies – hence the importance of discerning the reasons and methods by which state agencies enter (and leave) these networks. Jessop (2016, p. 115) suggests that analyzing “actually existing states in societies that are dominated by capitalist relations of production” requires the following:

1. A focus on the functional adequacy (e.g., how are state powers mobilized, for what, and by whom?) and material possibilities (e.g., what can be done?) of concrete state activities,

2. by adopting a processual approach to the particular historical formation and articulation of concrete state strategies (or “projects”, in Gramscian terms),

3. which select those social groups, factions, networks, and coalitions of actors that are practically adequate to pursue the interests of both general and specific types of capital accumulation strategies.

The study of the state in capitalist societies should consider the concrete strategies, and structural selectivities of the state institutional ensemble in modern capitalist societies, by privileging a reading of the state as a social relation and a contested terrain of social struggle. Jessop’s SRA (for an overview, Jessop 2005; 2007], Ch. 1–2; 2016], Ch. 3) builds on these intuitions to develop an account of the state as the contingent crystallization of specific principles of societal organization which, in a defined historical conjuncture, dominate but do not exclude other potentially dominant strategies.

Therefore, although “profit-oriented market-mediated accumulation” is the contemporary primary logic of socialization on a world scale (Jessop 2007, 2016], passim) – expressed for example by a generalized subordination to global financial capital (Gabor 2021, 2023]) – state projects can also be momentarily driven by other and competing principles of social organization (Hess 2021; Jessop 2016, pp. 42–45). These may include geopolitical security, environmental stewardship, welfare provisioning, ethnic cleansing, or theocratic rule. Moreover, the state’s strategic selectivities may privilege certain locations and some “market-mediated accumulation” strategies over others. For example, Rutherford and Holmes (2008) show how the Canadian automotive industry, concentrated in southern Ontario, largely favors Detroit-based transnational corporations, particularly smaller and localized enterprises. In a more recent paper, Rutherford et al. (2018) reveal how, in Quebec and Ontario, the intra-national dimension of state accumulation projects shapes the “strategic coupling” of regions and multinational actors from the metal transformation and automotive industry, respectively.

According to the SRA, despite the dominance of “profit-oriented market-mediated accumulation” strategies, contingent elements, such as path-dependent networks of actors, define the state project and the steering logic of the state apparatus. This is evident in those few studies applying SRA-inspired state theory to dissect the “actually existing” forms of state intervention in GPNs. Examples include the multi-scalar institutional interactions required to develop low-carbon energy in Northern England (Dawley et al. 2019), the contradictory relationships between the nation-state and transnational agri-food corporations in the Dominican Republic (Werner 2021b), the interrelationships between industrial policy and different capital fractions within the Ethiopian leather industry (Grumiller 2021), or the post-Brexit onshoring of lithium-ion battery production networks to safeguard the UK’s automotive industry (Bridge and Faigen 2023).

In summary, the SRA offers an analytical proposition distinct from both the state-market ontological split of neo-Weberian accounts and functionalist ex-post explanations of the embedded autonomy of the state. This article builds on previous theoretical discussions of the SRA in GPN literature (e.g., Hess 2021; Smith 2015; Werner 2021a) to strike a balance between the analytical benefits of characterizing state roles and the more nuanced reflections on the social relations guiding state action. Accordingly, the State-GPN Nexus could also be approached from three underdeveloped analytical angles:

1. The conjoint interrogation of state roles, “as contingent outcomes of political interests and struggles at different scales” and time horizons (Werner 2021a, p. 185). Indeed, scholars within the GPN/GVC tradition have already developed case studies combining the analysis of various state roles “for understanding of how their functions can bring about change in GPNs” (Raj-Reichert et al. 2022, p. 767) (see also, Bridge and Faigen 2022; Hughes et al. 2019). Consistent with Hess (2021), we argue that regulation of some sort (including liberalization processes as de-regulation) is a constant and pervasive feature of state engagement in GPNs. By combining non-regulatory state functions within concrete cases, scholars can better grasp the relations and feedback mechanism between institutional forms, as well as critically examine the interconnectedness and interdependency of institutional configurations (Werner 2021a). For instance, this combined analysis helps to identify how states as producers can influence consumption patterns, or how regulatory measures controlling outward capital flows can pave the way for enhancing domestic industrial capacity.

2. The more explicit analysis of additional forms of state intervention, chiefly finance. State finance extends beyond regulatory or facilitating measures, consisting of both individual funding schemes and their relationship with the macro-economic and financial environment (Dafermos et al. 2021; Gabor 2023). On one hand, financing mechanisms are orchestrated by various parastatal financial institutions, such as SWFs, development banks, or commercial banks (Alami and Dixon 2023, p. 90). On the other hand, state finance must also adapt to the prevailing macro-financial regime, for instance, influencing the interaction of fiscal and monetary policy. The “pressures of financial discipline” have been often underplayed in GPN scholarship (Coe and Yeung 2019). Perhaps due to a pervasive commitment to central bank independence, monetary policy often remains an overlooked side of state functions (Alami et al. 2022), despite its consequential influence on shaping market conditions – as in the case of Quantitative Easing and other unconventional measures during the 2010s. Currently, the financial State-GPN Nexus responds to the turn toward risk mitigation, represented by the recent proliferation of PPPs to ease investment opportunities (Bayliss and Van Waeyenberge 2018; Gabor 2021). Blended finance, for instance, “is used to adjust the risk-return profile to facilitate investment in projects that would not have otherwise received finance” (Bayliss et al. 2020, p. 1). Ostensibly, by leveraging public funds, state-owned development banks contribute financial resources while also supporting strategic state projects. A case in point is the European Fund for Sustainable Development (ex-EFSD, now EFSD+). With a budget of up to €135 billion (including guarantees and other leveraging instruments), the EFSD+ 2021–2027 term is meant to promote the EU Global Gateway, the bloc’s alternative to the Chinese Belt and Road Initiative (Bayliss et al. 2020).

3. The structuring of state agency within upper (i.e., historical regulatory form) and lower (i.e., foundational integration in society) conjunctural constraints. State strategies develop according to “relations between structurally-inscribed strategic selectivities and (differentially reflexive) structurally-oriented strategic calculation” (Jessop 2005, p. 48). In simpler terms, actors’ competing strategies and agendas – whether from industry groups, public bodies, or the transversal interests of PPPs – are both molded by and shaping the environmental conditions, i.e., the social, political, economic, ecological, or cultural contexts. Teixeira (2022, p. 13), for example, reveals how corporate capture can occur at the expense of labor standards, local communities, and the environment when “the strategic selectivity of states at multiple scales privileges and empowers different actors” which, in turn, “influence state accumulation strategies, including the rules for regions to pursue investments”. In capital-intensive industries, such as energy, the state regulatory apparatus must also respond to environmental disturbances (that is, external or exogenous), beyond the agentic powers of individual (groups of) actors. These disturbances – such as production bottlenecks, price dynamics, market sentiment, technological maturity, or geopolitical conflicts – are first elaborated within the institutionalized regulatory sphere, before permeating lower instances of state intervention. Similarly, everyday practices also influence higher levels of social organization. In other words, habits and historically formed preferences – like the choice of energy sources for domestic heating or commuting methods – demarcate a certain range of intervention for state institutions.

To illustrate how these theoretical contributions can practically contribute to the analysis of the State-GPN Nexus, the next sections introduce and discuss a case study reviewing the emergence of a low-carbon hydrogen economy structured around European transnational corporations, parastatal entities, public-private partnerships, and spatialized industrial policy.

4 Case study and data collection

Clean hydrogen is a widely discussed fuel in the context of the green transition, commonly presented as a prospective energy carrier complementary to electrification. Yet, virtually all hydrogen is currently produced using fossil fuels, although energy transition pundits foresee a staggering 60-fold expansion of “green hydrogen” production – that is, hydrogen produced with minimal greenhouse gas emissions (Griffiths et al. 2021; IEA 2023). While China currently dominates hydrogen production (30 %, followed by the US, Russia, and MENA countries), the EU and its member states seem strategically positioned to ride the forthcoming hydrogen wave. Factors such as investment outlooks, regulatory frameworks, patent holding, corporate networks, and industrial policy interventions contribute to this advantage (IEA 2023; Vezzoni 2024; Weichenhain et al. 2024). Hydrogen is thus emerging as a strategic industrial commodity for the energy transition in Europe.

Following the three analytical entry points to the State-GPN Nexus presented in Section 3 – i.e., the conjoint interrogation of state roles, finance as an additional form of state intervention, and the strategic selectivities on state agency (imposed by its historical regulatory form and integration in society) – the next section analyzes three key EU hydrogen policy developments. The first one concerns the ad hoc derogation of State Aid rules and environmental standards in the Important Projects of Common European Interest (IPCEI) (Section 5.1). The IPCEI represent not only an instrument to facilitate investment by de-risking industrial policy, but it also provides critical financing for hydrogen production sites which, as we shall see, are often owned by SOEs. This is an exemplary case of the state “switching hats” along the organization of energy production. The second case concerns the leveraging of public financing capacity to buffer private risk for hydrogen domestic production and global procurement through the European Hydrogen Bank (EHB) (Section 5.2). While the domestic pillar of the EHB facilitates European production via reverse auctions, its international strategy aims to buy hydrogen long-term to resell it short-term to domestic off-takers. The third case analyzes the spatialized industrial policy pursued by the European Hydrogen Valleys (Section 5.3). This shows the orchestration of local consumption following the development of production capacity on site. To minimize supply risk and integrate European energy markets, Hydrogen Valleys include the facilitation of regional clusters connected by transnational infrastructure. Each of these case studies responds to conjoint state roles, all of them underpinned by the regulatory form of the state. For instance, SOEs are not only at the receiving end of IPCEI funding or EHB mechanisms, but they also participate in the ideation of state policies such as the European Hydrogen Strategy. The same is true of private corporations and civil society actors, whose interests are mediated by the state apparatus, chiefly through PPPs and consulting firms. Moreover, the historical conjuncture defines the structural constraints – i.e., the “strategic selectivities” – in which these “actually existing” state projects are conceived. Thus, it is key to position the EU transition to low-carbon energy within competing pressures from the world economy (as in the case of the EHB import strategy or the EU Global Gateway) and the relations of production organizing the European economy from within (as in the development of Hydrogen Valleys along the European gas grid or the pivotal role of the Germany industry explored in the case studies).

The analysis draws on primary materials from expert interviews, policy documents, and corporate reports. It relies on 22 semi-structured interviews (four of which included two or more interviewees) with 27 interviewees lasting between 32 and 145 min. These were conducted online (except one, in person) in English, Spanish, Italian, and French between May 2023 and July 2024 (see Appendix, Table A). The interviewees are all based in Europe. Among them are consultants for major hydrogen projects, experts at intergovernmental energy organizations, specialists from advocacy or industry groups, and executives of Hydrogen Valleys or companies receiving hydrogen IPCEI funding. Initial contact was made via email or LinkedIn, targeting prominent organizations, advocacy groups, corporations, and project developers in Europe. In several cases in which no interview could eventually be conducted, this led nevertheless to additional email exchanges.

The interview materials have been partially transcribed with the help of Zoom-compatible AI tools and then refined manually. They have then been coded according to the state roles illustrated in Section 2, as well as the three analytical angles presented in Section 3. The results have been complemented by participant observation in five industry events on hydrogen developments in Europe, between May and June 2023. Finally, the primary materials have been cross-referenced with the documentary analysis for the three case studies. In the following sections, references to interviews use the codes provided in the Appendix.

5 Hydrogen developments in the EU

5.2 The European Hydrogen Bank

In December 2022, the H2Global Foundation (an initiative of the German government) launched HINT.CO GmbH, a financial instrument designed to import hydrogen-based products to develop a market for low-carbon hydrogen and its derivatives. HINT.CO operates via commercial agreements akin to contracts for difference (CfD), thus committing to long-term contracts with suppliers while, concurrently, reselling hydrogen through short-term contracts to German off-takers (Gabor and Sylla 2023). The German H2Global financial instrument served as a blueprint for designing the European Hydrogen Bank (EHB) (GOV_4; COR_8), as illustrated in Figure 1.

Figure 1:

The architecture of the European Hydrogen Bank. A very similar figure already appeared in a position paper by Hydrogen Europe “based on information so far provided at various stakeholder meetings. January 2023” (Hydrogen Europe 2023, p. 4), and therefore before the official communication of the EC in March 2023. Source: “Competitive bidding” on European Commission portal, Hydrogen Europe (2023).

Officially established in March 2023, the EHB aims to close “the investment gap” and connect “future supply of renewable hydrogen with” the 20 Mt/year by 2030 targeted in the REPowerEU, by facilitating “both renewable hydrogen production within the EU and imports” (European Commission 2023, p. 2). The EHB was endowed with €3 billion from the EU Innovation Fund, a figure that the lobby group Hydrogen Europe suggests should be pledged annually (Hydrogen Europe 2023, p. 6). In part as a response to the US IRA subsidy scheme for hydrogen production, the Bank began operations by targeting the domestic market. In April 2024, a first pilot reverse auction allocated €720 million in subsidies on the production costs of low-carbon hydrogen in the EU as a fixed premium over 10 years. Additionally, member states can cover the remainder of the supply curve through the Auctions-as-a-Service mechanism (another exception to EU State Aid rules), although without overlapping with IPCEI funding (CORP_6). Germany has been the only country to utilize this mechanism so far, financing German projects that did not receive EU-level support with an additional €350 million. Another round of reverse auctions is expected by the end of 2024.

The EHB operates by stabilizing and lowering the operating expenses of producers and off-takers. According to the EC, this targeted use of public resources is intended to hedge private risks by offering a buffer with public funds (European Commission 2023, p. 4) (COR_9). Thus, the reverse auctions of the EHB facilitate and finance domestic producers. Complementary to that, the EHB’s import pillar secures hydrogen in bulk at a fixed premium from foreign producers through long-term contracts and then distributes it among European off-takers. Although the international scheme (right pillar in Figure 1) remains yet to be designed, it is expected to mirror the CfD-like structure of the German H2Global.

Prominent candidates for hydrogen imports to Europe include Latin American countries like Chile or Brazil, where the EU Global Gateway (funded through the EFSD+, as noted in Section 3) earmarked €2 billion in November 2023 for constructing a production facility to export green hydrogen to Europe (ORG_3). Moreover, African countries like Algeria, Morocco, Mauritania, Egypt, Kenya, and Namibia have been scoped as potential trade partners by EU member states like Germany, the Netherlands, and Spain (Müller et al. 2022) (IND_2; GOV_4). The development of hydrogen commercial routes often requires complex infrastructure, such as pipelines or import terminals, begetting a turn to spatialized industrial policy, as explored in the next sub-section.

6 The State-GPN Nexus of European hydrogen

The three instances of state participation in establishing a hydrogen economy presented in Sections 5.1–5.3 cannot be fully understood by zooming in on a specific state role. Instead, they represent a composite analysis of the “actually existing state”, viewed as a multi-faceted institutional complex responding to the interests of different actors at different times and administrative levels. Thus, in the case of the IPCEI, the EU transnational state facilitates the establishment of strategic new industries through derogations to State Aid rules, while nation-states directly fund these business undertakings, according to their own developmental projects. Most importantly, the firms at the receiving end of state aid are often (at least partially) owned by the very same government providing the funds. The interplay of public entities, state capital, and private firms is all the more evident in the organizational make-up of Hydrogen Valleys, typically managed by consortia of regional authorities, ministerial agencies, local firms, and transnational corporations. These PPPs are financed by dedicated public and private vehicles, such as national chambers of commerce, Horizon Europe, or industry associations. They coordinate the synergic integration of necessary infrastructural development to pool public/private demand for public/private suppliers. It follows that Hydrogen Valleys emerge from the recursive interaction of not-so-clearly-demarcated “state roles” towards “the setup of regional ‘mini hydrogen economies’ […] to de-risk and synchronise investments and avoid stranded assets” (Weichenhain et al. 2022, p. 8).

This points to the second underdeveloped analytical angle explored in Section 3: the role of finance in structuring the State-GPN Nexus. The logic of de-risking private investments is a pervasive feature of hydrogen industrial policy in Europe (Hunt and Tilsted 2024). The Hydrogen Bank is explicitly designed as a mechanism “to leverage private sector investments by de-risking renewable hydrogen production” (European Commission 2023, p. 5). Similarly, Hydrogen Valleys are “evolving into a de-risking platform for larger-scale, phased (giga) project development” (Weichenhain et al. 2024, p. 11). However, there is little accountability embedded in these public investment strategies. Several Valleys have fallen short of the promised investments and industrial upgrading for which they received funding (ORG_1; IND_2; IND_3); whereas the IPCEI have been criticized for being lengthy and uncertain processes that are unlikely to deliver major transnational benefits by the end of the decade (COR_1; COR_5; COR_6; COR_8) (ECA 2024). Although windfall profits may be reclaimed by the Commission through a claw-back mechanism newly implemented in 2022, the IPCEI by definition can only fund projects that would not materialize if left to market forces alone.

This closely tallies the logic of blended finance behind the proliferation of PPP in public policy (Bayliss and Van Waeyenberge 2018; Bayliss et al. 2020; Gabor 2021). The hydrogen policy-making process in the EU is largely captured by a tight web of PPPs, notably: Hydrogen Europe, the ECHA, and the Clean Hydrogen Partnership. These PPPs are significantly influenced by industry groups outside the realm of democratic politics, like the Gas 4 Climate alliance behind the European Hydrogen Backbone (Guidehouse 2021). They not only directed the legislative process behind all the key measures analyzed in Section 5 – the IPCEI, the European Hydrogen Bank, and the Hydrogen Valleys – but, in the case of the Clean Hydrogen Partnership (within which Hydrogen Europe takes a steering role), they are also responsible for monitoring and implementing key policy milestones, such as the European Hydrogen Strategy of 2020 or the Hydrogen Valleys.

However, these PPPs, including those coordinating individual Hydrogen Valleys, represent diverse and, at times, contrasting economic interests and state projects. Sectors like automotive, oil and gas, and the chemical industry wield significant, although contrasting, influence on hydrogen developments in the EU (Vezzoni 2024), as evidenced by the tension between export-led Hydrogen Valleys and those for localized consumption. Furthermore, corporations are not alone in influencing European policy-making, which is also subject to inter-state competition among member countries (GOV_4; ORG_3; IND_5). Germany, for instance, has been attempting to coordinate the hydrogen IPCEI since its presidency of the Council of the EU in the second half of 2020^[2] (COR_8). As discussed in Section 5.1, smaller member countries have raised concerns regarding the potential cannibalization of IPCEI funding by larger states. Nevertheless, Germany retains a leading role in hydrogen policy, keeping a step ahead of other European players. Already in its 2020 national Hydrogen Strategy, Germany identified potential transnational joint ventures and collaborations with African countries (Kalvelage and Tups 2024; Müller et al. 2022). To be sure, in line with the SRA arguments developed in this article, it is important not to take “Germany” or “German interests” as a unitary entity. Instead, they represent the articulation of diverse economic agendas, political strategies, and social struggles within the German state complex (Schneider 2022, pp. 11–13).

In conclusion, state action is decisively shaping the emergence of a European hydrogen industry, both at the EU transnational level and within member countries. The state system not only facilitates the uptake of hydrogen and its derivatives, but through SOEs and investment in SWFs, state capital actively participates in both the production process – as evidenced by the long list of suppliers in Table 3 – and the creation of demand through public procurement and pooling of end-users – as in the case of Hydrogen Valleys. These instances of state participation in the hydrogen economy are underpinned by its regulatory power over market relations. Measures like the Carbon Border Adjustment Mechanism, National Energy and Climate Plans, or industrial standards for “renewable hydrogen” production in the EU do more than merely shield nascent industries with a “greenhouse” of protective measures (as the facilitator role in Horner’s typology would imply), or limit undesirable outcomes of market forces (regulator role). These governmental interventions are instead tailored to suit the principles of societal organization which, in the current historical conjuncture, define the historical regulatory form of the state. In our case study, all state actions – whether facilitating, producing, buying, or financing economic development – are subsumed under the historical peculiarities of the EU in the 21st century: a regional block stifled by import-dependence, scarce resource availability (in terms of transition materials and land), and several decades of de-industrialization, whilst retaining the centrality of economic growth at all costs. Moreover, as pointed out in several studies (Gabor 2023; Jessop 2007, pp. 212–217; Vezzoni 2023), the macro-financial regime prevailing in the EU severely limits the possibility of designing fiscal policies antithetical to market-mediated capital accumulation.

7 Conclusions

Amidst the recent surge in interest around state policy and energy transitions, concepts such as state capital, industrial policy, state strategies, and various “state returns” have increasingly become contentious topics also in mainstream policy discussions. However, scholarly debates often portray essentializing accounts of the state as an autonomous (somehow relative or embedded) entity, territorially defined by the borders of the nation, in wrestling contraposition with the market – wherein market expansion corresponds to state retreat, and vice versa.

Drawing on Jessop’s strategic-relational approach (SRA), this article has framed the “actually existing” state as a conjunctural crystallization of social relations, integrating diverse and overlapping strategies. Arguably, this points to at least three underdeveloped analytical angles to the State-GPN Nexus: (1) the conjoint interrogation of different state roles (as already explored in, e.g., Bridge and Faigen 2022; Hughes et al. 2019); (2) to the importance of financial instruments as well as the macro-financial regime, for how it shapes fiscal and monetary policy interactions (Alami et al. 2022; Gabor 2021); and (3) the structuring of state agency within the contingent contexts in which it takes place (Jessop 2005).

Through three case studies on hydrogen developments in the EU – the IPCEI, the EHB, and Hydrogen Valleys – we have sought to illustrate the value of combining the analysis of the multifaceted roles that state entities assume when partaking in GPNs. As discussed in Section 6, state aid is occasionally directed towards domestic SOEs, which may also be (partially) owned by foreign SWFs, to develop projects aligned with the strategies of the EU transnational state, which have been predominantly formulated by industry-led PPPs established by the EU that, in turn, lobby the EU itself on behalf of industry. This rather convoluted process underscores the many hats that the state wears at different junctures throughout its participation in industrial energy networks. Likewise, the relation with the macro-financial regime is also a crucial factor shaping the State-GPN Nexus, whether through the risk hedging strategies of the European Hydrogen Bank, the adaptation of State Aid rules of the IPCEIs, or the spatial integration of the European energy industry in Hydrogen Valleys.

This is particularly evident in the energy sector, and even more so in its conversion to low-carbon technologies. The development of a hydrogen economy, for instance, reveals how the state intervenes when market forces fail to mobilize investments, due to either lack of prospective profitability or widespread uncertainty. In such cases, the de-risking strategies prevalent in European industrial policy offer the private sector a way to hedge risks by effectively transferring potential losses from their balance sheets to the public budget. While the democratic accountability of these processes is questionable, the outcomes thus far have fallen short of expectations, as also reprimanded in a report of the European Court of Auditors on the EU’s hydrogen industrial policy (ECA 2024).

Overall, the state projects driving the transformation of European energy systems seem to hinge on increasing international competitiveness to spur green economic growth. Accordingly, as an integral part of the world capitalist economy, the historical regulatory form of the state in the EU constrains the type of energy transition fueled by hydrogen to a set of initiatives fostering a new economic cycle of capital accumulation in competition with other regional blocs. This may lead to the paradoxical continuation of business-as-usual operations dominated by heavily polluting industries, such as oil refineries and fertilizer plants (Hunt and Tilsted 2024; Vezzoni 2024). So much for the alleged “return of the state” as a historical counterbalance to the short-sighted dynamics of profit-seeking market forces.